Report: Social Security panel can't reach consensusDecember 8, 1996
Web posted at: 11:00 a.m. EST
WASHINGTON (CNN) -- After more than two years of work, a federal advisory panel studying ways to reform Social Security has been unable to agree on solutions to the system's long-term financial problems, The New York Times reported Sunday.
"The council has not only been unable to agree on a plan, we have been unable to agree on the proper criteria to use in assessing the plans," says a draft of the panel's final report, which is to be issued this month.
The 13-member panel, which was appointed in 1994 by Health and Human Services Secretary Dr. Donna Shalala, cannot decide between three new models of how to invest the money in the fund, the paper said.
Some members seem to agree that the fund could earn more if some of the money were invested in stocks rather than government securities, the Times said.
One five-member group proposes creating a two-tier system of "personal security accounts" in which a flat amount of federal funds are supplemented by funds from a mandatory personal security account to be invested at the owner's discretion.
Forty percent of current payroll deductions would be diverted into the personal account for independent investment. The benefits would vary from worker to worker, depending on the success of the investments.
A second faction, led by former Social Security Commissioner Robert Ball, sees the "extraordinarily high degree of go-it-alone individualism" involved in the idea as incongruent with the community nature of Social Security.
"We do not believe that the nation's basic retirement system should require everyone -- the knowledgeable and the inexperienced, the lucky, the rich and the poor -- to bear investment risk as isolated individuals," Ball told the Times.
Ball's group prefers an investment plan that keeps the individual's risks manageable and affordable by investing the money as a group.
The five members aligned with Ball favor investing a percentage of Social Security funds in private stocks and bonds, but argue that an independent board should passively oversee investing the fund to follow a broad index of market performance.
Two other members, including panel chairman Edward M. Gramlich, want to establish mandatory individual savings accounts that would be owned by workers but managed by the government.
If long-term reforms are not made in the system, analysts predict, the Social Security trust fund will go bankrupt by 2029.
This year, the amount of money the government collects for Social Security will exceed, by $60 billion, the amount it must pay in benefits. Starting in 2012, once baby boomers begin to retire, the fund will spend more than it earns.
In a speech Saturday, Federal Reserve Chairman Alan Greenspan cautioned that tough financial decisions must be made soon.
Greenspan voiced tentative support for the idea of investing retirement funds in the private sector, saying that proposals to partially privatize Social Security by switching investments from Treasury bills to the stock market offer a "potentially viable solution to current funding problems."
While unable to agree on long-term solutions, the advisory committee will endorse solutions to short-term problems that could keep the fund solvent until 2050 or beyond, a major accomplishment, according to the Times.
While applauding the group's short-term choices, Gramlich agreed that the panel must look to the long-term continuation of Social Security benefits.
"These short-term fixes are nice, and we can agree on them. But it's important for us to do something more to raise national savings for retirement and to do it soon," Gramlich said.
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